Becoming a Guarantor of Joint Account Holder for a Loan

I want to help my son, a recent graduate, build good credit. He wants to buy a used motorcycle. I was willing to guarantee the personal loan, but the bank wants me to be a joint borrower. If I agree, it is not clear to me whether my son’s credit rating will improve as much as if I were just the guarantor. Which approach would produce the greatest benefit? Would being a joint borrower help my son’s credit score at all?

– HRC

Dear HRC,

Guarantors, also called cosigners, and joint account holders have the same responsibility with regard to the debt. The effect is the same on both your credit and his.

Cosigners and joint account holders are both equally responsible for repayment of the debt. Therefore, the account would appear on both your report and your son’s report, and will contribute to his credit score as well as yours.

Provided all payments are made on time, the payment history for either type account should help him build a positive credit history. In time, that history will enable him to qualify for new credit on his own.

Keep in mind that the reverse is also true. Any late payments made on the account will negatively affect not only his report, but yours as well. That means you should trust him to make the payments, but also make sure you have access to the account to verify that it is being paid as agreed.

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